Oil & Natural Gas Corporation, on 4 September 2006, announced that the greenfield petroleum refinery project in Rajasthan was officially shelved. The 7.5 million tpa greenfield refinery was designed to process crude from Cairn Energy's onshore oil discovery (RJ-ON-90/1) in Barmer district of the state.

Instead of building the refinery, which would have cost Rs.8,000 crore, ONGC is planning to lay a pipeline to transport crude oil outside Rajasthan, to public and private sector refiners. Reliance Industries (Mukesh Ambani Group) and Essar Oil have expressed their interest in purchasing crude oil.

The refinery would prove uneconomical due to the fact that by the time the refinery came up, which would have been around 2011, peak oil production from the Barmer field would have started dwindling. Cairn has estimated that production from the Barmer field would begin in the last quarter of 2008 at levels of 100,000 bpd, peaking to around 150,000 bpd from 2009-12.

It is also learnt that Rajasthan crude being of high wax content, new-generation private sector refineries like Reliance's Jamnagar refinery and Essar Oil's Vadinar refinery, would be in a better position to process it, as opposed to public sector ones.

ProjectsToday adds: The proposal for a petroleum refinery in Rajasthan first came up in 2004 at the behest of the state government. The proposal never found favour with the Union petroleum ministry that had in March 2004 itself refuted the proposal in favour of laying a crude pipeline from Barmer to Indian Oil Corporation's Kandla-Bhatinda oil pipeline.

Also See:

ONGC rethinking Barmer refinery project? (22-Aug-06)